News Release

GREENWICH, Conn., Oct. 28, 2019 (GLOBE NEWSWIRE) -- XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the third quarter 2019. Revenue was $4.15 billion for the quarter, compared with $4.34 billion for the same period in 2018. Net income attributable to common shareholders was $117 million for the quarter, compared with $101 million for the same period in 2018. Operating income was $229 million for the quarter, compared with $209 million for the same period in 2018. Diluted earnings per share was $1.14 for the quarter, compared with $0.74 for the same period in 2018.

Adjusted net income attributable to common shareholders, a non-GAAP financial measure, was $121 million for the third quarter 2019, unchanged from the same period a year ago. Adjusted diluted earnings per share, a non-GAAP financial measure, was $1.18 for the quarter, compared with $0.89 for the same period in 2018.

Adjusted net income attributable to common shareholders and adjusted diluted earnings per share for the third quarter 2019 exclude: $11 million, or $8 million after-tax, of restructuring costs, primarily severance; and a benefit of $4 million, or $3 million after-tax, of non-cash unrealized gains on foreign currency contracts.

Adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), a non-GAAP financial measure, increased to $438 million for the third quarter 2019, compared with $415 million for the same period in 2018. Adjusted EBITDA for the third quarter 2019 excludes $11 million of restructuring costs, primarily severance.

For the third quarter 2019, the company generated $278 million of cash flow from operations and $257 million of free cash flow, a non-GAAP financial measure. Reconciliations of non-GAAP financial measures used in this release are provided in the attached financial tables.

Updates 2019 Financial Targets

The company updated its full-year 2019 targets for revenue, depreciation and amortization, effective tax rate and cash taxes, and reaffirmed its targets for adjusted EBITDA, free cash flow and net capital expenditures, as follows:

Revenue of (2.5%) to (4.0%) year-over-year, from (1%) to 1% previously; which translates to organic revenue growth, a non-GAAP financial measure, of flat to 1.0%, from 2.5% to 4.5% previously. The update to revenue reflects the company’s expectation for continued softness in the macro environment;

Adjusted EBITDA in the range of $1.675 billion to $1.725 billion, or year-over-year growth of 7% to 10%, unchanged from prior guidance;

Free cash flow in the range of $575 million to $675 million, unchanged;

Net capital expenditures in the range of $400 million to $450 million, unchanged;

Depreciation and amortization in the range of $745 million to $765 million, from $765 million to $785 million previously;

Effective tax rate in the range of 23% to 25%, from 25% to 28% previously; and

Cash taxes in the range of $110 million to $130 million, from $130 million to $150 million previously.

The company’s 2019 targets for free cash flow and cash taxes assume cash interest expense of $275 million to $290 million. The company continues to expect an incremental benefit to free cash flow of $125 million to $150 million from trade receivables programs in 2019.

CEO Comments

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, “In the third quarter, we grew EPS by 54% and adjusted EPS by 33% year-over-year. We also delivered a solid beat on adjusted EBITDA, outpacing the macro through cost control and margin discipline. In less-than-truckload, our adjusted operating ratio was a third quarter record. We remain firmly on track to generate at least $1 billion of EBITDA from LTL in 2021.”

Jacobs continued, “Our significant investments in technology are creating tailwinds across our operations. We’re executing on 10 initiatives that represent a pool of $700 million to $1 billion of potential profit improvement over the next several years. One large opportunity is to apply our XPO Smart productivity tools to the $5 billion of annual costs related to our variable labor spend. All 10 initiatives are specific to XPO and largely independent of the operating environment. We’re very focused on the size of the prize and the meaningful potential uplift to our profitability.”

Third Quarter 2019 Results by Segment

Transportation: The company's transportation segment generated revenue of $2.68 billion for the third quarter 2019, compared with $2.85 billion for the same period in 2018. The reduction in segment revenue primarily reflects a decrease in freight brokerage and direct postal injection revenue from the company's largest customer, lower rates in truck brokerage and unfavorable foreign currency exchange, partially offset by growth in managed transportation.

Operating income for the transportation segment was $208 million for the third quarter 2019, compared with $196 million for the same period in 2018. Adjusted EBITDA for the segment was $333 million for the quarter, compared with $326 million for the same period in 2018.

In North American LTL, yield, excluding fuel, improved by 2.9% year-over-year for the third quarter 2019. The third quarter operating ratio for LTL was 82.3%. Adjusted operating ratio, a non-GAAP financial measure, was a third quarter record at 80.8%, a 460 basis point improvement year-over-year.

Logistics: The company's logistics segment generated revenue of $1.51 billion for the third quarter 2019, compared with $1.52 billion for the same period in 2018. Organic revenue growth was 2.4%, led by consumer packaged goods, food and beverage and aerospace in North America, and by e-commerce in Europe, largely offset by a reduction in business from the company's largest customer.

Operating income was $61 million for the third quarter 2019, compared with $59 million for the same period in 2018. Adjusted EBITDA for the segment was $142 million for the quarter, compared with $128 million from the same period in 2018. The increase in adjusted EBITDA primarily reflects growth from existing customers and from new business startups in recent quarters, offset in part by a reduction in business from the company's largest customer and unfavorable foreign currency exchange.

Corporate: Corporate SG&A expense was $40 million for the third quarter 2019, compared with $46 million for the same period in 2018.

Nine Months 2019 Financial Results

For the nine months ended September 30, 2019, the company reported total revenue of $12.51 billion, compared with $12.89 billion for the same period in 2018. Net income attributable to common shareholders was $282 million for the first nine months of 2019, compared with $306 million for the same period in 2018. Operating income was $619 million for the first nine months of 2019, compared with $578 million for the same period in 2018. Earnings per diluted share was $2.63 for the first nine months of 2019, compared with $2.26 for the same period in 2018.

Adjusted net income attributable to common shareholders was $312 million for the first nine months of 2019, compared with $334 million for the same period in 2018. Adjusted earnings per diluted share was $2.91 for the first nine months of 2019, compared with $2.48 for the same period in 2018. Adjusted net income attributable to common shareholders and adjusted earnings per diluted share for the first nine months of 2019 exclude: $28 million, or $20 million after-tax, of restructuring costs, primarily severance; a non-cash charge of $6 million, or $4 million after-tax, related to the impairment of customer relationship intangibles; $5 million, or $4 million after-tax, of non-cash unrealized losses on foreign currency contracts; $5 million, or $4 million after-tax, of debt extinguishment costs; and $2 million, or $2 million after-tax, of transaction, integration and rebranding costs.

Adjusted EBITDA for the first nine months of 2019 increased to $1.24 billion, compared with $1.18 billion for the same period in 2018. Adjusted EBITDA for the first nine months of 2019 excludes: $28 million of restructuring costs, primarily severance; and $2 million of transaction, integration and rebranding costs.

Conference Call

The company will hold a conference call on Tuesday, October 29, 2019, at 8:30 a.m. Eastern Time. Participants can call toll-free (from US/Canada) 1-877-269-7756; international callers dial +1-201-689-7817. A live webcast of the conference will be available on the investor relations area of the company’s website, xpo.com/investors. The conference will be archived until November 29, 2019. To access the replay by phone, call toll-free (from US/Canada) 1-877-660-6853; international callers dial +1-201-612-7415. Use participant passcode 13695126.

About XPO Logistics

XPO Logistics, Inc. (NYSE: XPO) is a top ten global logistics provider of cutting-edge supply chain solutions to the most successful companies in the world. The company operates as a highly integrated network of people, technology and physical assets in 30 countries, with 1,531 locations and approximately 100,000 employees. XPO uses its network to help more than 50,000 customers manage their goods most efficiently throughout their supply chains. XPO's corporate headquarters are in Greenwich, Conn., USA, and its European headquarters are in Lyon, France. xpo.com

Non-GAAP Financial Measures

As required by the rules of the Securities and Exchange Commission ("SEC"), we provide reconciliations of the non-GAAP financial measures contained in this press release to the most directly comparable measure under GAAP, which are set forth in the financial tables attached to this release.

XPO’s non-GAAP financial measures for the three and nine months ended September 30, 2019 used in this release include: earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA on a consolidated basis and for our transportation and logistics segments; free cash flow; adjusted net income attributable to common shareholders and adjusted earnings per share (basic and diluted) ("adjusted EPS"); net revenue for our transportation and logistics segments and intersegment eliminations; adjusted operating income and adjusted operating ratio for our North American less-than-truckload business; and organic revenue and organic revenue growth on a consolidated basis and for our logistics business.

We believe that the above adjusted financial measures facilitate analysis of our ongoing business operations because they exclude items that may not be reflective of, or are unrelated to, XPO and its business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. Other companies may calculate these non-GAAP financial measures differently, and therefore our measures may not be comparable to similarly titled measures of other companies. These non-GAAP financial measures should only be used as supplemental measures of our operating performance.

Adjusted EBITDA, adjusted net income attributable to common shareholders and adjusted EPS include adjustments for transaction, integration and rebranding costs as well as adjustments for restructuring costs. Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition and include transaction costs, acquisition and integration consulting fees, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems. Rebranding adjustments primarily relate to the rebranding of the XPO Logistics name on our truck fleet and buildings. Restructuring costs primarily relate to severance costs associated with business optimization initiatives. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating XPO's and each business segment's ongoing performance.

We believe that free cash flow is an important measure of our ability to repay maturing debt or fund other uses of capital that we believe will enhance stockholder value. We calculate free cash flow as adjusted net cash provided by operating activities, less payment for purchases of property and equipment plus proceeds from sale of property and equipment, with adjusted net cash provided by operating activities defined as net cash provided by operating activities plus cash collected on deferred purchase price receivables. We believe that EBITDA and adjusted EBITDA improve comparability from period to period by removing the impact of our capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables that management has determined are not reflective of core operating activities and thereby assist investors with assessing trends in our underlying businesses. We believe that adjusted net income attributable to common shareholders and adjusted EPS improve the comparability of our operating results from period to period by removing the impact of certain costs and gains that management has determined are not reflective of our core operating activities. We believe that net revenue improves the comparability of our operating results from period to period by removing the cost of transportation and services, in particular the cost of fuel, incurred in the reporting period as set out in the attached tables. We believe that adjusted operating income and adjusted operating ratio for our North American less-than-truckload business improve the comparability of our operating results from period to period by (i) removing the impact of certain restructuring costs and amortization expenses and, (ii) including the impact of pension income incurred in the reporting period as set out in the attached tables. We believe that organic revenue is an important measure because it excludes the following items: foreign currency exchange rate fluctuations, fuel surcharges and revenue associated with our direct postal injection service in last mile.

With respect to our 2019 financial targets for adjusted EBITDA, free cash flow and organic revenue, as well as our 2021 target for EBITDA in our North American less-than-truckload business, each of which is a non-GAAP measure, a reconciliation of the non-GAAP measure to the corresponding GAAP measure is not available without unreasonable effort due to the variability and complexity of the reconciling items described below that we exclude from the non-GAAP target measure. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP that would be required to produce such a reconciliation.

Forward-looking Statements

This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including our 2019 financial targets for our consolidated revenue and organic revenue, adjusted EBITDA, free cash flow, net capital expenditures, depreciation and amortization, effective tax rate, cash taxes and the free cash flow benefit from our trade receivables programs, as well as our 2021 target for EBITDA in our North American less-than-truckload business and our potential profit growth opportunity by 2022. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target," "trajectory" or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include the risks discussed in our filings with the SEC and the following: economic conditions generally; competition and pricing pressures; our ability to align our investments in capital assets, including equipment, service centers and warehouses, to our customers' demands; our ability to successfully integrate and realize anticipated synergies, cost savings and profit improvement opportunities with respect to acquired companies; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; our substantial indebtedness; our ability to raise debt and equity capital; our ability to maintain positive relationships with our network of third-party transportation providers; our ability to attract and retain qualified drivers; litigation, including litigation related to alleged misclassification of independent contractors and securities class actions; labor matters, including our ability to manage our subcontractors, and risks associated with labor disputes at our customers and efforts by labor organizations to organize our employees; risks associated with our self-insured claims; risks associated with defined benefit plans for our current and former employees; fluctuations in currency exchange rates; fluctuations in fixed and floating interest rates; fuel price and fuel surcharge changes; issues related to our intellectual property rights; governmental regulation, including trade compliance laws; and governmental or political actions, including the United Kingdom's likely exit from the European Union. All forward-looking statements set forth in this release are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this release speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.

(1) Net income attributable to common shareholders reflects the following items:

Non-cash allocation of undistributed earnings

$

12

$

7

$

28

$

23

Preferred dividends

1

1

2

2

(2) The sum of quarterly net income attributable to common shareholders and earnings per share may not equal year-to-date amounts due to differences in the weighted-average number of shares outstanding during the respective periods and the impact of the two-class method of calculating earnings per share.

XPO Logistics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In millions, except per share data)

September 30,

December 31,

2019

2018

ASSETS

Current assets:

Cash and cash equivalents

$

425

$

502

Accounts receivable, net of allowances of $60 and $52, respectively

2,577

2,596

Other current assets

424

590

Total current assets

3,426

3,688

Property and equipment, net of $1,905 and $1,585 in accumulated depreciation, respectively

(1) See the “Non-GAAP Financial Measures” section of the Press Release.

(2) Other income (expense) consists of pension income and is included in Other expense (income) on the Condensed Consolidated Statement of Income.

(3) For purposes of the summary financial table, adjusted EBITDA is reconciled to operating income in the Condensed Consolidated Statements of Income.

Transportation

Key Data by Service Offering

(Unaudited)

(In millions)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Revenue

North America

Freight Brokerage (1)

$

633

$

739

$

1,876

$

2,178

Less-Than-Truckload

987

981

2,925

2,890

Last Mile

219

271

655

778

Managed Transport

134

110

400

361

Total North America

1,973

2,101

5,856

6,207

Europe

Freight Brokerage and Truckload

450

457

1,393

1,408

Less-Than-Truckload

240

246

742

757

Total Europe

690

703

2,135

2,165

Global Forwarding

74

84

229

251

Eliminations

(53)

(38)

(130)

(111)

Total Revenue

$

2,684

$

2,850

$

8,090

$

8,512

Net Revenue

North America

Freight Brokerage

$

114

$

138

$

368

$

376

Less-Than-Truckload

412

393

1,183

1,158

Last Mile

74

77

214

227

Managed Transport

23

23

78

75

Total North America

623

631

1,843

1,836

Europe

154

150

486

483

Global Forwarding

18

14

47

43

Total Net Revenue (2)

$

795

$

795

$

2,376

$

2,362

Net Revenue %

North America

Freight Brokerage

18.1%

18.7%

19.6%

17.3%

Less-Than-Truckload

41.8%

40.0%

40.4%

40.0%

Last Mile

33.5%

28.2%

32.6%

29.1%

Managed Transport

17.0%

21.6%

19.4%

20.9%

Total North America

31.6%

30.0%

31.5%

29.6%

Europe

22.4%

21.4%

22.8%

22.3%

Global Forwarding

24.9%

17.2%

20.9%

17.3%

Overall Net Revenue %

29.6%

27.9%

29.4%

27.8%

Direct Operating Expense

North America

Freight Brokerage

$

23

$

23

$

69

$

69

Less-Than-Truckload

151

168

463

506

Last Mile

24

23

67

64

Managed Transport

12

16

46

54

Total North America

210

230

645

693

Europe

97

102

293

308

Global Forwarding

3

3

9

10

Total Direct Operating Expense

$

310

$

335

$

947

$

1,011

(1) Freight Brokerage revenue declined 14% year-over-year for the third quarter and the first nine months of 2019, with loss of business from the Company’s largest customer accounting for 11% and 10% of the decline in each of the two periods, respectively.

(2) See the “Non-GAAP Financial Measures” section of the Press Release.

Less-Than-Truckload revenue is before intercompany eliminations and includes revenue from the Company's trailer manufacturing business.

XPO Logistics North American Less-Than-Truckload

Summary Data Table

(Unaudited)

Three Months Ended September 30,

2019

2018

Number of Working Days

63.5

63.0

Lbs. per Day (Thousands)

73,055

75,385

% Change in Lbs. per Day (1)

-3.1%

-1.5%

Shipments per Day

53,075

52,769

% Change in Shipments per Day (1)

0.6%

-5.4%

Avg. Weight per Shipment (in pounds)

1,376

1,429

% Change in Weight per Shipment (1)

-3.7%

4.2%

Gross Revenue per Shipment

$

295.79

$

300.76

Gross Revenue per Hundred Weight (including fuel surcharges)

$

21.49

$

21.05

Gross Revenue per Hundred Weight (excluding fuel surcharges)

$

18.58

$

18.05

% Change in Gross Revenue per Hundred Weight (1)

Including fuel surcharges

2.1%

4.6%

Excluding fuel surcharges

2.9%

1.9%

Average Length of Haul (in Miles)

817.5

805.5

Total Average Load Factor (2)

23,700

22,342

Average Age of Tractor Fleet (Years)

5.06

5.71

(1) Compared with the same quarter of the previous year.

(2) Total Average Load Factor equals freight pound miles divided by total linehaul miles.

XPO Logistics North American Less-Than-Truckload

Adjusted Operating Ratio

(Unaudited)

(In millions)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

$ Variance

Change %

2019

2018

$ Variance

Change %

Revenue (excluding fuel surcharge revenue)

$

839

$

826

$

13

1.6%

$

2,482

$

2,439

$

43

1.8%

Fuel surcharge revenue

135

143

(8)

-5.6%

404

414

(10)

-2.4%

Revenue

974

969

5

0.5%

2,886

2,853

33

1.2%

Salaries, wages and employee benefits

454

442

12

2.7%

1,350

1,312

38

2.9%

Purchased transportation

97

104

(7)

-6.7%

305

300

5

1.7%

Fuel and fuel-related taxes

65

75

(10)

-13.3%

205

218

(13)

-6.0%

Other operating expenses

90

121

(31)

-25.6%

285

363

(78)

-21.5%

Depreciation and amortization

57

62

(5)

-8.1%

169

183

(14)

-7.7%

Maintenance

26

26

-

0.0%

80

77

3

3.9%

Rents and leases

12

11

1

9.1%

36

33

3

9.1%

Purchased labor

1

3

(2)

-66.7%

5

9

(4)

-44.4%

Operating income

172

125

47

37.6%

451

358

93

26.0%

Operating ratio (1)

82.3%

87.0%

84.4%

87.4%

Restructuring costs

1

-

1

100.0%

3

-

3

100.0%

Amortization expense

8

8

-

0.0%

25

25

-

0.0%

Other income (2)

6

8

(2)

-25.0%

17

22

(5)

-22.7%

Adjusted operating income (3)

$

187

$

141

$

46

32.6%

$

496

$

405

$

91

22.5%

Adjusted operating ratio (4) (5)

80.8%

85.4%

82.8%

85.8%

(1) Operating ratio is calculated as (1 - (Operating income divided by Revenue)).

(2) Other income primarily consists of pension income and is included in Other expense (income) on the Condensed Consolidated Statement of Income.

(3) See the “Non-GAAP Financial Measures” section of the Press Release.

(5) Less-Than-Truckload adjusted operating ratio improved year-over-year by 460 basis points for the third quarter and 300 basis points for the first nine months of 2019, with sales of real estate accounting for 270 basis points and 200 basis points, respectively.

Logistics

Summary Financial Table

(Unaudited)

(In millions)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

$ Variance

Change %

2019

2018

$ Variance

Change %

Revenue

$

1,510

$

1,517

$

(7)

-0.5%

$

4,530

$

4,473

$

57

1.3%

Cost of transportation and services

217

226

(9)

-4.0%

658

693

(35)

-5.1%

Net revenue (1)

1,293

1,291

2

0.2%

3,872

3,780

92

2.4%

Direct operating expense

1,091

1,095

(4)

-0.4%

3,278

3,202

76

2.4%

Sales, general and administrative expense

Salaries and benefits

80

67

13

19.4%

249

217

32

14.7%

Other sales, general and administrative expense

18

30

(12)

-40.0%

50

67

(17)

-25.4%

Purchased services

20

20

-

0.0%

60

61

(1)

-1.6%

Depreciation and amortization

23

20

3

15.0%

67

59

8

13.6%

Total sales, general and administrative expense

141

137

4

2.9%

426

404

22

5.4%

Operating income

$

61

$

59

$

2

3.4%

$

168

$

174

$

(6)

-3.4%

Other income (expense) (2)

5

8

(3)

-37.5%

17

24

(7)

-29.2%

Total depreciation and amortization

73

59

14

23.7%

201

172

29

16.9%

EBITDA (1)

$

139

$

126

$

13

10.3%

$

386

$

370

$

16

4.3%

Transaction, integration and rebranding costs

-

1

(1)

-100.0%

-

3

(3)

-100.0%

Restructuring costs

3

1

2

200.0%

5

1

4

400.0%

Adjusted EBITDA (1) (3)

$

142

$

128

$

14

10.9%

$

391

$

374

$

17

4.5%

(1) See the “Non-GAAP Financial Measures” section of the Press Release.

(2) Other income (expense) consists of pension income and is included in Other expense (income) on the Condensed Consolidated Statement of Income.

(3) For purposes of the summary financial table, adjusted EBITDA is reconciled to operating income in the Condensed Consolidated Statements of Income.

Logistics

Key Data by Geography

(Unaudited)

(In millions)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Revenue

North America

$

622

$

597

$

1,828

$

1,713

Europe

888

920

2,702

2,760

Total Revenue

$

1,510

$

1,517

$

4,530

$

4,473

Net Revenue

North America

$

594

$

573

$

1,751

$

1,635

Europe

699

718

2,121

2,145

Total Net Revenue (1)

$

1,293

$

1,291

$

3,872

$

3,780

Direct Operating Expense

North America

$

534

$

506

$

1,580

$

1,456

Europe

557

589

1,698

1,746

Total Direct Operating Expense

$

1,091

$

1,095

$

3,278

$

3,202

Gross Margin

North America

$

60

$

67

$

171

$

179

Europe

142

129

423

399

Total Gross Margin

$

202

$

196

$

594

$

578

Gross Margin %

North America

9.7%

11.2%

9.4%

10.5%

Europe

16.0%

14.1%

15.6%

14.5%

Total Gross Margin %

13.4%

12.9%

13.1%

12.9%

(1) See the “Non-GAAP Financial Measures” section of the Press Release.

XPO Corporate

Summary of Sales, General and Administrative Expense

(Unaudited)

(In millions)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

$ Variance

Change %

2019

2018

$ Variance

Change %

Sales, general and administrative expense

Salaries and benefits

$

23

$

26

$

(3)

-11.5%

$

75

$

78

$

(3)

-3.8%

Other sales, general and administrative expense

3

6

(3)

-50.0%

9

8

1

12.5%

Purchased services

11

11

-

0.0%

33

42

(9)

-21.4%

Depreciation and amortization

3

3

-

0.0%

11

8

3

37.5%

Total sales, general and administrative expense

$

40

$

46

$

(6)

-13.0%

$

128

$

136

$

(8)

-5.9%

Intersegment Eliminations

Summary Financial Table

(Unaudited)

(In millions)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

$ Variance

Change %

2019

2018

$ Variance

Change %

Revenue

$

(40)

$

(32)

$

(8)

25.0%

$

(108)

$

(95)

$

(13)

13.7%

Cost of transportation and services

(38)

(32)

(6)

18.8%

(100)

(95)

(5)

5.3%

Net revenue (1)

(2)

-

(2)

100.0%

(8)

-

(8)

100.0%

Direct operating expense

-

-

-

0.0%

(1)

(1)

-

0.0%

Sales, general and administrative expense

Salaries and benefits

(1)

-

(1)

100.0%

(4)

-

(4)

100.0%

Other sales, general and administrative expense

(1)

-

(1)

100.0%

(2)

(1)

(1)

100.0%

Purchased services

-

-

-

0.0%

(1)

2

(3)

-150.0%

Depreciation and amortization

-

-

-

0.0%

-

-

-

0.0%

Total sales, general and administrative expense

(2)

-

(2)

100.0%

(7)

1

(8)

-800.0%

Operating income

$

-

$

-

$

-

-

$

-

$

-

$

-

-

Note: Intersegment Eliminations represent intercompany activity between the Company's reportable segments that is eliminated upon consolidation. The difference between operating income component line items in the Condensed Consolidated Statements of Income and the sum of the respective line items from the Transportation and Logistics Summary Financial Tables and Corporate Summary of Sales, General and Administrative Expense above represents intercompany eliminations between our reportable segments. The table above summarizes the intersegment eliminations by line item.

(1) See the “Non-GAAP Financial Measures” section of the Press Release.

(1) The sum of quarterly net income attributable to common shareholders and distributed and undistributed net income may not equal year-to-date amounts due to the impact of the two-class method of calculating earnings per share.

(1) See the “Non-GAAP Financial Measures” section of the Press Release.

Reconciliation of Non-GAAP Measures

XPO Logistics, Inc.

Reconciliation of GAAP Revenue to Organic Revenue

(Unaudited)

(In millions)

Logistics

Consolidated

Three Months Ended September 30,

2019

2018

2019

2018

Revenue

$

1,510

$

1,517

$

4,154

$

4,335

Fuel

-

-

(428)

(452)

Direct postal injection revenue

-

-

-

(59)

Foreign exchange rates

43

-

78

-

Organic Revenue

$

1,553

$

1,517

$

3,804

$

3,824

Organic Revenue Growth (1)

2.4%

-0.5%

(1) Organic revenue growth is calculated as the relative change in year-over-year organic revenue, expressed as a percentage of 2018 organic revenue. See the “Non-GAAP Financial Measures” section of the Press Release.